Global airfreight slides; eyes on US non-farm payrolls; Korea launches 5G; India cuts rates; German factory orders drop; iron ore price surges; UST 10yr at 2.51%; oil up and gold down; NZ$1 = 67.6 USc; TWI-5 = 72.3

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Here’s our summary of key events overnight that affect New Zealand, with news of more evidence world trade is on the slide.

The volume of international airfreight slumped -4.9% in February from the same month in 2018 and is the lowest February in three years. The Asia-Pacific region has been particularly hard hit with volumes down more than -11%. This backtrack in trade mirrors the new export orders component of global factory PMIs. This airfreight data is broadly matched by a low Baltic Dry index for ocean shipping.

The decline we see in airfreight trade is not happening for passenger travel however. This is still growing although the rate of growth is moderating. In the year to February, it is up +4.6% which is slightly below its long-run growth level. In the Asia-Pacific region, the growth is a little softer at +4.2% pa. As an aside, the same data shows the domestic Australian air travel data declining at a faster rate than previously. It has been weak for a while now.

In the US, the number of Americans filing applications for jobless benefits fell to a nearly half-century low last week, pointing to sustained labour market strength despite slowing economic momentum. All eyes are now on tomorrow’s non-farm payrolls report. The question will be how strong the bounce back from February’s unusually low level will be. Analysts are picking a very modest +180,000 gain.

In Korea, they have launched the world’s first 5G network and signed up the first subscribers. They have beaten the US to the punch who launched in selected markets a few hours later, followed probably by China who is some way off yet. 5G allows a massive improvement in mobile (wireless) connectivity, allowing IoT capability to be cheap and easy. It will likely challenge wired UFB for speed.

In India, their central bank cut its policy interest rate by -25 bps overnight to 6.0%. Although not unanimous, it was a widely expected move to boost the Indian economy and comes just a week ahead of when national election voting begins. India’s government cleared out the central bank’s independent governor last year replacing it with one more sympathetic to the policies of the government. Analysts expect another rate cut relatively soon as India’s economic growth is slowing, down to ‘just’ +6.6% in December, its lowest in more than a year. Although inflation remains restrained, falling farm incomes and record high unemployment are seen hampering the government’s re-election prospects.

In Germany, factory orders fell sharply in February. And the rate of decline – -4.2% pa – was twice that reported in January and the January data caused real concern. Today’s data will heighten that.

In Australia, their energy market operator is being forced to intervene daily in their electricity grid as an influx of renewable energy and ageing coal-fired power stations make their distribution systems unstable.

And the price of iron ore, Australia’s biggest export (although coal claimed this title recently), has surged more than +10% in five days, boosting miners and the Aussie tax take.

The UST 10yr yield is little-changed this morning to 2.51%. Their 2-10 curve is at +17 bps and their negative 1-5 curve is at -10 bps. The Aussie Govt 10yr is also little-changed at 1.90%, the China Govt 10yr is higher, up another +3 bps to 3.27%, while the NZ Govt 10 yr is also up, now at 2.03%, up another +9 bps since this time yesterday. Yesterday local swap rates firmed again, especially at the long end.

Gold is down -US$2 at US$1,289/oz.

US oil prices are slightly firmer today at just under US$63/bbl while the Brent benchmark is now at US$70/bbl.

The Kiwi dollar is a little softer this morning and now at 67.6 USc. On the cross rates we are also marginally lower at 95 AUc. Against the euro we are down slightly at 60.2 euro cents. That puts the TWI-5 at 72.3.

Bitcoin has slipped back under US$5,00 this morning and is now at US$4,944, up another +8% in the past 24 hour. This rate is charted in the exchange rate set below.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».

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